Ingram Micro 2011 Annual Report Download - page 61

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INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets
acquired in an acquisition and should be reviewed at least annually for potential impairment. We have no
recorded goodwill as of December 31, 2011 and January 1, 2011.
Concentration of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist
principally of cash and cash equivalents, trade accounts receivable from customers and vendors, and derivative
financial instruments. Our cash and cash equivalents are deposited and/or invested with various financial
institutions globally that are monitored by us regularly for credit quality. Credit risk with respect to trade
accounts receivable is limited due to the large number of customers and their dispersion across geographic areas.
No single customer has accounted for 10% or more of our consolidated net sales in 2011, 2010 and 2009 and no
customer accounts receivable balance was greater than 10% at December 31, 2011 and January 1, 2011. We
perform ongoing credit evaluations of our customers’ financial conditions, obtain credit insurance in many
locations and require collateral in certain circumstances. We maintain an allowance for estimated credit losses.
Derivative Financial Instruments
We operate in various locations around the world. We reduce our exposure to fluctuations in foreign
exchange rates by creating offsetting positions through the use of derivative financial instruments in situations
where there are not offsetting balances that create a natural hedge. The market risk related to the foreign
exchange agreements is offset by changes in the valuation of the underlying items being hedged. In accordance
with our policy, we do not use derivative financial instruments for trading or speculative purposes, nor are we a
party to leveraged derivatives.
Foreign exchange risk is managed primarily by using forward contracts to hedge foreign currency-
denominated receivables, payables and intercompany loans and expenses. Interest rate swaps and forward
contracts are used to hedge foreign currency-denominated principal and interest payments related to
intercompany loans.
All derivatives are recorded in our consolidated balance sheet at fair value. The estimated fair value of
derivative financial instruments represents the amount required to enter into similar offsetting contracts with
similar remaining maturities based on market-derived prices. Changes in the fair value of derivatives not
designated as cash flow hedges are recorded in current earnings.
The notional amount of forward exchange contracts is the amount of foreign currency bought or sold at
maturity. The notional amount of interest rate swaps is the underlying principal amount used in determining the
interest payments exchanged over the life of the swap. Notional amounts are indicative of the extent of our
involvement in the various types and uses of derivative financial instruments but are not a measure of our
exposure to credit or market risks through our use of derivatives.
Credit exposure for derivative financial instruments is limited to the amounts, if any, by which the
counterparties’ obligations under the contracts exceed our obligations to the counterparties. We manage the
potential risk of credit losses through careful evaluation of counterparty credit standing, selection of
counterparties from a limited group of financial institutions and other contract provisions including collateral
deposits.
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